Uh-Oh: Australian Treasury Official Warns Country May Be In A Housing Bubble

E-mails obtained by the paper suggest that officials inside the Treasury are locked in a debate about a potential bubble.

Specifically, Steve Morling, who is general manager of the domestic economy division, wrote (emphasis ours):

The elephant in the room is house prices or more specifically the risk of a precipitous drop in them, perhaps from an external shock or perhaps from their own internal dynamics when affordability constraints or capacity debt levels see prices and expectations of house prices start to move in the opposite direction.

If China's tightening goes too far (or just far enough), demand for Australia's mining products could dry up, creating a spike in unemployment in the country. Such a spike might be the trigger for a housing market collapse.